Which method of preparing the operating activities section of a statement of cash flows reports major classes of gross cash receipts and cash payments for revenues and expenses?

Question

Quizplus · Accepted Answer

The direct method of preparing the operating activities section of a statement of cash flows reports major classes of gross cash receipts and cash payments for revenues and expenses individually, making it easier to understand the sources and uses of cash. The indirect method starts with net income and adjusts it with non-cash transactions, making it harder to understand the cash flow from operations. The balance sheet method and retained earnings method are not methods of preparing the operating activities section.

Which Method of Preparing the Operating Activities Section of a Statement